Quarterly Cartel Catch-Up: Full Steam Ahead for Cartel Enforcement in 2024

As anticipated, cartel enforcement is ramping up at the start of 2024 and investigations relating to artificial intelligence (AI) are taking center stage.

Leadership of both the broader Department of Justice (DOJ) and the Department’s Antitrust Division (Division) have doubled down on their intent to focus enforcement actions on use of pricing algorithms and AI. Senior Division officials confirmed the existence of “numerous active investigations” concerning AI and revealed that they are targeting markets that have not historically received antitrust scrutiny (e.g., fragmented, non-concentrated industries). DOJ has filed Statements of Interest in two private class actions where plaintiffs allege price coordination via pricing software tools, in an attempt to influence the development of court decision-making in this space. Notably, DOJ leadership also authorized prosecutors to seek longer sentences when an offense includes the use of AI.

These new battlefronts have sparked a renewed focus on compliance. Senior Division officials have emphasized that compliance programs must account for the use of algorithms and other information-sharing tools. Meanwhile, following the guidance of DOJ leadership, the Division also rolled out new language in its enforcement tools making clear that ephemeral messaging and work in collaborative environments must be preserved. The Division warned that the failure to do so could have severe consequences for companies, executives, and their counsel.

Meanwhile, the Division’s other criminal antitrust investigations continue on pace with 2023, with the announcement of new plea agreements in investigations in the asphalt, commercial flooring, and ready-mix concrete industries. And an international concrete admixture company revealed that the Division is one of several international enforcers currently investigating the industry. However, the Division’s enforcement efforts received a blow when the Fourth Circuit Court of Appeals denied the Division’s petition to rehear the Brewbaker case, which overturned a bid-rigging conviction. This unfortunate precedent for the Division may continue to haunt these types of investigations and prosecutions.

Internationally, EU authorities continue to target consumer-facing industries for enforcement actions, a trend that appears likely to continue in response to inflationary pressures around the world. UK authorities continue to target cartels in labor markets and information-sharing violations, but had a setback when a UK court refused to authorize a dawn raid on the home of an executive. Indian antitrust authorities are attempting to jumpstart their enforcement efforts by introducing a leniency-plus component to their immunity program. Finally, several international enforcers recently met with Division leadership to emphasize collaboration and joint investigations of cartels, including enforcement related to the 2026 FIFA World Cup.

All this and more in the newest edition of the Quarterly Cartel Catch-Up.

Division Foreshadows Enforcement Against “Unspoken” Agreements Facilitated by Artificial Intelligence

Key Point: The Division is keenly focused on artificial intelligence (AI) as a means of facilitating price-fixing and other cartels.

In January 2024, Assistant Attorney General Jonathan Kanter described the “numerous” active investigations by the Division relating to AI and competition, and a senior Division official described criminal enforcement efforts targeting AI and pricing algorithms as a “high priority.” According to current leadership, the use of pricing algorithms and other AI tools will be considered criminal violations when they are used to achieve price-fixing agreements, even if there are no direct communications between competitors. Consistent with prior statements, the Division has made clear it will focus on the conduct at issue -- if a human manually engaged in the same conduct and it was unlawful, then it will remain unlawful if it is performed by an algorithm. 

The Division’s focus on the issue is also apparent in its civil enforcement efforts, having recently filed statements of interest in two ongoing civil cases related to the use of pricing algorithms. Although not a case brought by the Division itself, the Division is clearly interested in influencing the developing law on these topics.

These new investigative efforts are part of a broader focus on AI. In February 2024, another Division official discussed how small companies must prioritize updating their compliance programs to account for AI-related technology because the Division may focus its efforts on industries that historically have not been the target of antitrust scrutiny. At the same time, Deputy Attorney General Lisa Monaco authorized all DOJ prosecutors to seek sentencing enhancements when an offense involves the use of AI because it presents more serious risks to victims and the public at large. As the focus on AI continues to build, it seems to be only a matter of time until the Division’s efforts start to bear fruit.

UK Enforcers Target Information Exchanges and Labor Market Cartels, While an Appeals Court Prohibits a Dawn Raid at the Home of an Executive

Key Point: The UK’s Competition & Markets Authority (CMA) is actively investigating labor market cartels and information exchanges, but suffered a setback when a court ruled that it could not search the home of an executive.

In early 2024, the UK’s CMA pursued new enforcement actions for unlawful information exchanges among competitors and against suspected cartels in labor markets.

In January 2024, the CMA launched a labor market probe targeting Firmenich International, Givaudan, and International Flavors & Fragrances for allegedly entering into illegal no-poach agreements. This investigation is a continuation of enforcement actions in the labor market, which began in July 2022 with an investigation of several production companies about possible collusion over wages paid to freelancers in sports broadcasting, and makes good on the promise in the CMA’s 2023 and 2024 Annual Plan to make labor market cartels an enforcement priority.

In February 2024, the CMA launched an investigation into eight construction companies for a potentially illegal information exchange related to the building of homes. This is the first investigation the CMA has launched following the publication of a 2021 market study that uncovered evidence allegedly showing an exchange of information on pricing, incentives, and rates of sale. The CMA previously used its competition market study power to “detect and uncover suspected consumer protection issues.”

Finally, in March 2024, the CMA appealed a court’s denial of an application for a warrant to raid an executive’s home in connection with a cartel investigation of the construction chemicals industry. In its appeal, the CMA argued that documents are “just as likely to be stored at home” as at a business location, and prohibiting a search of a domestic location would allow cartels to evade law enforcement by storing devices at home.

U.S. in Mix of Enforcers Investigating Potential Price Fixing in Concrete Admixture Sector

Key Point: Following the October 2023 dawn raids of several concrete admixture producers by European authorities, one subject confirms that U.S. enforcers are involved as well.

Cemex, one of the world’s largest building materials companies, announced in February 2024 that it received a grand jury subpoena from the U.S. Department of Justice in connection with an investigation into “possible antitrust violations in the cement additives and concrete admixtures sector.” Concrete admixtures, cement additives, and admixtures for mortar are added to concrete, cement, and mortar to give the finished product certain qualities, such as reducing the amount of water needed for aggregate to set, reducing set time, reducing shrinkage, stabilizing or preventing cracking, or inhibiting corrosion. The global market for these additives reached more than $27 billion in 2022.

This news follows on the heels of news last fall that European enforcers were investigating possible anticompetitive conduct in the construction chemical admixture sector. In October 2023, European Commission, UK, and Turkish authorities raided several companies in the construction chemicals sector, including Saint-Gobain, Sika, Master Builders Solutions, and others. The UK CMA and the Turkish Competition Authority subsequently launched investigations related to the supply of concrete chemical admixtures. This news confirmed suspicions of the involvement of U.S. enforcers and underscores the international scrutiny of the industry.

Antitrust Enforcers Bridge Borders to Combat Cartels and Celebrate Competition

Key Point: The Division continues to strengthen partnerships with international enforcers, including in Europe, Canada, Mexico, and South Korea.

During the early months of 2024, the Division met with antitrust enforcers across the globe to discuss enforcement priorities and strategize about enhanced cooperation.

On January 16, 2024, the Division and the European Commission released a joint video message promising to intensify their combined efforts to crack down on cross-border cartels. Noting their history of collaborating on leniency applications, the enforcers shared their plans to strengthen cooperation on investigations outside of the leniency system and encouraged individuals or companies with suspicions of collusive behavior to come forward.

On January 23, 2024, the Division and Federal Trade Commission participated in a meeting with Mexico’s Federal Economic Competition Commission (COFECE) and Canada’s Competition Bureau. At the trilateral meeting, the enforcers discussed hot topics related to competition in the technology sector and labor markets. The next day, Assistant Attorney General Kanter spoke at COFECE’s 10th Anniversary Celebration to highlight that the United States and Mexico have worked to benefit competition and consumers in transportation, housing, and labor markets. Kanter also previewed how that cooperation will increase as they prepare for the 2026 FIFA World Cup, likely referring to a joint initiative to tackle collusion related to the World Cup that the countries announced in 2023.

On February 27, 2024, South Korea’s Fair Trade Commission and the Division convened to discuss ways to enhance bilateral cooperation. The two enforcers also exchanged updates on price-fixing, fraud, and other antitrust matters, especially regarding the digital economy. This meeting prefaced the Division’s March 6, 2024 announcement of additional charges against a South Korean company and individual for rigging bids to U.S. military installations in the country.

No Vanishing Acts: Division Signals a New Focus on Ephemeral Messages

Key Takeaway: New guidance and public statements from the Division and Federal Trade Commission (FTC) reiterate the expectation that companies are obligated to preserve and produce documents from modern workplace tools, and highlight the significant consequences for those, including both companies and their counsel, who don’t.

The Division and the FTC issued joint guidance regarding the use of collaborative (e.g., Microsoft Teams) and ephemeral messaging (e.g., Signal) technologies. The new guidance and prior comments by senior agency officials, suggest severe consequences for companies—and potentially their counsel—who do not take adequate steps to preserve and produce responsive materials from these platforms. On January 26, 2024, the DOJ and FTC jointly announced that they were updating language across their investigatory tools—including preservation letters, second requests specifications, voluntary access letters, and grand jury subpoenas—to emphasize parties’ obligations to preserve and produce documents from these modern workplace tools. This announcement noted that the failure to produce such documents may result in obstruction of justice charges. Senior Division official Leslie Wulff, Chief of the Antitrust Division’s San Francisco office, remarked that the failure to ensure that all relevant documents are preserved could result in criminal exposure for outside and company counsel.

Although it remains to be seen how aggressively the Division will pursue this conduct, separate and apart from the collusive conduct itself, companies (and counsel) should consider planning ahead about how best to mitigate these risks if they use these types of technologies.

India Seeks to Boosts Cartel Enforcement with Updated Leniency Regime

Key Point: The Competition Commission of India (CCI) introduced a new leniency-plus program to bolster cartel enforcement in the country; this program offers immunity or reduced penalties to cartel participants who cooperate with the CCI.

On February 20, 2024, the CCI introduced the Lesser Penalty Regulations, an updated leniency regime intended to jumpstart historically sluggish cartel enforcement in the country. The revisions offer new benefits for cartel participants currently under investigation if they can bring evidence of a new cartel to the CCI.

This initiative aims to incentivize cartel participants to come forward and disclose their involvement by providing not only immunity for the second cartel, but also significantly reduced penalties for involvement in the original cartel if they cooperate with the CCI. Eligible participants may receive an additional 30 percent reduction in monetary penalties for the first cartel.

The updated regime requires an applicant to submit sufficient information for the CCI to determine if a new cartel exists on a prima facie basis. If an applicant withdraws their application for leniency, the Commission remains at liberty to use any information or document submitted by the applicant for any reason except as an admission by the applicant.

With the addition of a leniency-plus component, the CCI’s leniency program now aligns with similar leniency programs in the Unites States, Singapore, the United Kingdom, and Brazil.

Division Announces Additional Guilty Pleas for Price Fixing and Bid Rigging

Key Point: The Division’s Procurement Collusion Strike Force (PCSF) is continuing its efforts to combat market allocation, bid-rigging, and price-fixing.

In January 2024, the Division announced four additional guilty pleas in its ongoing investigation into bid-rigging in Michigan’s asphalt industry. This latest round of guilty pleas involved Asphalt Specialists LLC, its former Vice President, Bruce Israel, AI’s Asphalt Paving Company Inc., and its president, Edward Swanson. These are the fourth and fifth individuals, and the second and third companies, to enter guilty pleas as part of the Division’s ongoing investigation into bid-rigging in Michigan’s asphalt industry in the 2010s. For more on the Division’s efforts, see our earlier summaries Quarterly Cartel Catch-Up: Recent Developments in Criminal Antitrust for Busy Corporate Counsel ‒ 3rd Quarter 2023 and Quarterly Cartel Catch-Up: What to Watch in 2024.

Also in January 2024, Kevin Mahler, a former project manager for government contracts, pleaded guilty to a conspiracy to inflate project costs and pay kickbacks related to contracts for commercial flooring services at a U.S. Army facility in Fairbanks, Alaska. Mahler inflated the project costs by over $200,000 in exchange for over $100,000 in kickbacks from the owner of the company, Benjamin McCulloch.

In March 2024, the Division reached plea agreements with Evans Concrete and former company owner Timothy Strickland after the ready-to-mix concrete company was recently indicted for alleged price-fixing, bid-rigging, and market allocation in Georgia.

En Banc Denial May Force DOJ to Appeal Brewbaker Decision Regarding Bid-Rigging to the Supreme Court

Key Point: The Fourth Circuit panel declined to revisit its decision overturning former Contech executive’s bid-rigging conviction, and the Division did not receive any support for a rehearing by the full court despite arguing that the decision flies in the face of long-standing Supreme Court and circuit precedent.

In a two-sentence order issued on February 15, 2024, the Fourth Circuit denied the government’s petition for either the panel or the full court to rehear the decision overturning Brewbaker’s bid-rigging conviction. In its petition, the Division argued that the panel erred in finding per se violations cannot exist when the conduct involves parties that have both a horizontal (competitor) and a vertical (supplier) relationship. The Division argued that this ruling essentially gives companies a “get-out-of-jail-free card” when it comes to bid-rigging allegations because rivals can skirt per se treatment by simply distributing each other’s products.

In denying the motion, the Fourth Circuit did not state explain its reasoning but did note that no judge requested a poll on the petition for rehearing en banc, which suggests the court did not see the decision as out-of-step with precedent, as the Division did.

The Division now has 90 days to file a petition for certiorari with the Supreme Court for additional review. Although the government may have an uphill battle convincing the Supreme Court to hear the case, allowing the decision to stand invites the Fourth Circuit’s “purely horizontal” test to be applied in other circuits, which may further imperil the Division’s criminal enforcement program.

With Inflation Surging, European Enforcers Focus on Consumer Sector

Key Point: European enforcers have targeted companies in the consumer sector for enforcement, conducting a large number of dawn raids across the industry.

European regulators are increasingly focusing on companies in the consumer sector. In 2023, competition authorities across the EU, Switzerland, and the UK launched 26 dawn raids against various consumer goods companies.

So far in 2024, the trend appears to be continuing. In January, the European Commission (EC) announced raids at the premises of companies active in the tires industry in several EU Member States. In its press release, the EC said it was concerned that price coordination took place among the inspected companies, including via public communications (so-called price-signaling). The raids were also carried out alongside counterparts from national EU competition authorities. And in February 2024, the Irish Competition Authority said it had raided companies active in the home alarm industry on suspicion of competition law breaches.

The focus on the consumer sector appears to be motivated by regulators’ concerns that high inflation has increased the likelihood of collusion, and therefore there are a number of investigations regarding prices, labor practices, and consumer rights. Given the persistence of inflationary pressure, we can expect enforcers to continue to target consumer sectors for investigation.

Mexico Taking a Closer Look at Noncompete Clauses in Merger Agreements

Key Point: Mexican federal enforcers have turned their attention to noncompete clauses, an uncommon practice in transactions.

In February 2024, Andrea Marván Saltiel, president of Mexico’s Federal Economic Competition Commission (COFECE), spoke about the agency’s careful consideration of noncompete clauses. “Under certain circumstances,” Marván said, “noncompete[s] can be considered part of the transaction and in some cases, a cartel.”

According to Marván, depending on their design, noncompetes could be viewed as a form of employer collusion or market allocation. Marván cited a recent case where two executives in the construction industry resigned from their employer and planned to start their own company. COFECE found that the noncompete clause between the former employer and the executives prevented the executives from entering the market and competing for a decade. The noncompete clause resulted in fines for two companies and three individuals.

Although noncompete clauses are not common in Mexican transactions, COFECE has been diligent in its scrutiny when they appear in an investigation.

California Previews Criminal Crack Down on Antitrust Violations

Key Point: Despite a long drought of criminal antitrust charges, California recently announced it will once again pursue anti-competitive activity as criminal under the State’s Cartwright Act.

On March 6, 2024, Senior Assistant Attorney General Paula Blizzard announced that the California Office of the Attorney General’s Antitrust Section is reviving its criminal antitrust program under the California Cartwright Act, Cal. Bus. & Prof. Code § 16700 et seq. The Act—which California has not used to bring charges in more than two decades—largely aligns in scope with its federal counterpart, the Sherman Act. However, speaking on a recent panel about criminal antitrust enforcement, Blizzard emphasized that the Cartwright Act covers “broader” conduct. For example, Blizzard highlighted that under the California law, even third parties’ supplying of information in furtherance of a conspiracy may constitute actionable “furnish[ing of] information” under Section 16755. During the same panel, Blizzard indicated that the California AG intends to coordinate with the Division to develop certain components of its criminal enforcement regime, like a leniency program. As a result of the California AG’s renewed interest in bringing criminal antitrust charges, companies doing business in California should proactively consider the Cartwright Act when developing effective antitrust compliance programs.

You can read our full coverage of California’s move toward criminal prosecution.

Interagency Strike Force Targeting Unfair and Illegal Pricing—FTC’s New Antitrust Enforcement “Muscle”

Key Point: As part of its whole-of government antitrust enforcement effort, the Biden administration recently launched a new interagency Strike Force on Unfair and Illegal Pricing “to root out and stop illegal corporate behavior that hikes prices on American families” in key sectors.

On March 5, 2024, the White House launched the new interagency Strike Force on Unfair and Illegal Pricing (Strike Force) to be chaired by the FTC and the DOJ with the goal of lowering costs, promoting competition, and operationalizing the 1936 statute that prohibits price discrimination—the Robinson-Patman Act (RPA)—which until recently has laid dormant for decades. FTC Chair Lina Kahn described the new Strike Force as another tool that will help the FTC build “muscle” in its revitalization of the RPA to fight against big businesses and anticompetitive, unlawful business practices that inflate costs for Americans.

The new Strike Force is similar to the Division’s Procurement Collusion Strike Force (PCSF) that has recently broadened its collaborations with additional federal agencies plus state and local enforcers. The Biden administration intends for the new Strike Force to facilitate information sharing across agencies like the PCSF.

The Strike Force will have a significant impact on enforcement against the pricing practices of businesses in industries such as healthcare, food and grocery, housing, financial services, and likely others. Companies should consider taking steps to (1) ensure their current pricing practices do not create heightened risks and (2) assess the risks of contemplated pricing policies that collaborate with other entities or differentiate between customers.

You can read our full coverage of the Strike Force.